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Citi: Iran, Iraq & Libya Likely to See No Output Surge in 2018

Those in the oil market fearing a flood of OPEC supply next year will probably be better off preparing for a shortage, according to Citigroup Inc. Five countries in the group - Libya, Nigeria, Venezuela, Iran and Iraq - may already be pumping at their maximum capacity this year, Ed Morse, the bank’s global head of commodities research, said in an interview. Rather than a surge in output, there’s a risk of a market squeeze emerging as early as 2018, driven by those nations because of weaker investment in exploration and development, he said.

“Fear in the market has been that OPEC production will rise dramatically,” said Morse. However, “there could be a supply gap emerging, which could point to a tighter market,” he said in Singapore on the sidelines of the S&P Global Platts APPEC Conference.

If the output reductions are prolonged, that would only hasten the prospect of a tighter market, said Morse, adding that the source of the supply squeeze will probably be OPEC rather than producers outside the group. “There’s no room for them to do more,” he said, referring to the five nations.

“We’re seeing more and more evidence that it’s not the international oil companies, it’s not the independent oil companies that are lagging new investments, but it’s OPEC countries lagging, particularly those five,” he said. - Bloomberg